Recursive Methods in Economic Dynamics

Features

• Cover Type: Hard Cover with 608 pages
• Published by: Harvard University Press October 10, 1989
• Written in: English
• ISBN 10 Number: 0674750969
• ISBN 13 Number: 978-0674750968
• Book Dimensions: 9.2 x 6.1 x 1.8 inches
• Weighs: 2.2 pounds

Product Review
A awesome work that is bound to have immense influence on the ways economists think about dynamic systems for many years to come. My own guess is that this book will eventually acquire the stature, say, of Hicks's Value and Capital or Samuelson's Foundations.
--Thomas J. Sargent, Hoover Institution

The book is a tour de force. The authors present a unified approach to the techniques and applications of recursive economic theory. The presentations of discrete-time dynamic programming and of Markov processes are authoritative. There is a wide-ranging series of examples drawn from all branches of the discipline, but with special emphasis on macroeconomics. In the short run, the book will be a vital reference in any advanced course in macroeconomic theory. In the long run, it may help to remove the traditional boundaries between microeconomic theory and macroeconomic theory.
--Andrew Caplin, Columbia University

This book is a wonderful collection of results on the techniques of dynamic programming with great applications to economics written by giants in the field.
--Sanford J. Grossman, University of Pennsylvania

Product Description


This rigorous but brilliantly lucid book presents a self-contained treatment of modern economic dynamics. Stokey, Lucas, and Prescott develop the basic methods of recursive analysis and illustrate the many areas where they can usefully be applied.

After presenting an overview of the recursive approach, the authors develop economic applications for deterministic dynamic programming and the stability theory of first-order difference equations. They then treat stochastic dynamic programming and the convergence theory of discrete-time Markov processes, illustrating each with additional economic applications. They also derive a strong law of large numbers for Markov processes. Finally, they present the two fundamental theorems of welfare economics and show how to apply the methods developed earlier to general equilibrium systems.

The authors go on to apply their methods to many areas of economics. Models of firm and industry investment, household consumption behavior, long-run growth, capital accumulation, job search, job matching, inventory behavior, asset pricing, and money demand are among those they use to show how predictions can he made about individual and social behavior. Researchers and graduate students in economic theory will find this book essential.

Reader Reviews
As a research economist or graduate student, especially if working in economic theory or dynamic macroeconomics, it is difficult to overstate the value of this book as a handy guide for a set of essential facts (re: theorems) regarding the existence of solutions to dynamic programming problems or markov decision processes, as well as characterizing the properties of the set of solutions. That being said, this is not the book a budding theorist wants to learn techniques from (For the mathematical prerequisites: measure theory, topology, probability, stochastic processes, hilbert spaces, there are better treatments in the math literature. For dynamic programming in discrete time itself: Bertsekas and Shreve's 1978 text is far superior). Though I am not an expert in macroeconomics, I believe Sargent's sequence of books is a better source for learning the how-to-do, while keeping the economic questions crystal clear: neither of these is a strong point of this book.